"Always remember the difference between economic power and political power: You can refuse to hire someone's services or buy his products in the private sector and go somewhere else instead. In the public sector, though, if you refuse to accept a politician's or bureaucrat's product or services you go to jail. Ultimately, after all, all regulations are observed and all taxes are paid at gunpoint. I believe those few who can't even see that have been short-sighted sheep...." ~ Rick Gaber

Funny Non-Money

There is the possibility, as pointed out by writers on subjects financial, that the government, which is in debt up to, and beyond, its ears, might seize the retirement funds of its subjects. By this means, we are told, our Rulers might reduce their debt by paying off at least part of it with the stolen--er, taxed--funds. In truth, in seizing its subjects’ retirement savings, the Rulers will not reduce the debt at all, but merely transfer it from themselves to their victims.

That is because of a fact which, to a Monetary Realist, is as obvious as the Rulers’ psychopathy, namely: There is no money, and therefore, no means of paying debts—only “settling” them, i.e., re-assigning them.

Over time, many things have served as money: salt, cattle, shells, precious metals. What they had in common was: a degree of scarcity, desirability, and, being substances, the possibility of being weighed, measured, and standardized. The standardized unit of United States money was the dollar--a specific weight and purity of gold or silver. Today the term “dollar” has no specific meaning.

So: what is money today? It is absolutely mind-boggling that, although money is an essential element of civilization, a concern of the entire populace, and spoken of and referred to by everyone everyday, no one I’ve asked has been able to tell me what it is.

When people speak of money today, what they are referring to is some form of debt. Federal Reserve Notes, for example, are “obligations”--debts--of the United States. Bank deposits--nothing more tangible than numbers in accounts--are the “liabilities” of commercial banks. Do the holders of these IOUs have any claim upon anything from their issuer? No, of course not.

Years ago, I sent a Federal Reserve Note to the Secretary of the Treasury with the request that he do whatever he was required to do to honor the obligation represented by the note. He returned my bill with a brief note declaring that returning it satisfied the obligation. If you ask the bank to honor its liabilities, as represented in your account, it will give you Federal Reserve Notes! In other words, certain IOUs—though not yours or mine--pay themselves! A miracle! Or, more accurately, a crime!

Where do these IOUs--“liabilities” or “obligations”--come from? Are they issued pursuant to a deposit of something valuable somewhere? No. They are created from nothing by commercial banks in the “lending” process. If you borrow $10,000 from the bank, it does not transfer to your account $10,000 from its own account at the Fed, or from its depositors’ accounts, but rather it simply adds $10,000 to your account, which you must then repay--with interest. There’s the rub! If you returned to the bank the full amount borrowed, the debt would not be paid, because of the interest which is owed. Since all of the “money” was created in this way--banks are our only source of it, and they only provide it as a loan--returning to the banks every “dollar” in existence would not pay the debt, since principal was borrowed, but principal PLUS INTEREST must be repaid. It is undeniable, therefore, that society is attempting to borrow itself out of debt--an attempt which is bound to--and indeed MUST—fail.

But can an organization that can creates “money” fail? Let’s see. Its primary concern is the value of its assets. (As they say, if you owe the bank a million dollars, you worry. If you owe the bank a billion dollars, the bank worries.) The bank’s assets are the IOUs of its borrowers. When you borrowed that $10,000 from the bank, your promissory note became an asset of the bank. If you cannot repay, that asset becomes worthless, while the bank’s liability—the $10,000 still on deposit in some account--remains the same. Bad!! If you are “too big to fail,” the bank will lend you more money to enable you to pay at least the interest on your debt. But what if you cannot even do that? Not to worry! The bank will get a handout from Uncle Sam--the world’s biggest debtor! It’s insane, of course--a mere juggling of numbers--but it postpones the inevitable, at least temporarily.

What a mess! Our “money” is debt. There isn’t enough of it to repay what is owed, because of the interest. But interest can be paid by borrowing it--at interest! Madness! What’s more--and even more preposterous--is that if there were some way to repay the debt, we would be left with no “money,” since that worrisome debt IS our money!

Indeed, the very concept of debt becomes muddled when there is no way to repay a debt, but only to satisfy the creditor with more borrowed IOUs.